2006 (12) TMI 45 - AT - Customs

Demand (Customs) Alleged that appellant diverted the duty free imported raw material instead of utilizing the same in the manufacture of export goods After investigation authority find the allegation right and accordingly penalty were sustainable.

Summary

Issues involved:
Violation of DEEC scheme conditions, diversion of imported raw materials, duty recovery, confiscation of goods, penalty imposition.

Analysis:
The appellants imported SS Coils/Sheets under DEEC licences and cleared them duty-free under Notification No. 30/97-Cus. The DEEC scheme required them to discharge their export obligation within the prescribed time. However, an investigation revealed that a quantity of the imported goods had been diverted to other premises. The department issued a show-cause notice for duty recovery, confiscation of goods, and penalty imposition. The Commissioner of Customs demanded duty, confiscated the goods, and imposed a penalty. The appeal challenges these decisions.

The appellants claimed to have fulfilled their export obligation as certified by the ADGFT through redemption certificates. They argued that the impugned order was unsustainable based on the export obligation fulfillment. The department contended that the goods were seized from external premises and released later, indicating diversion. The department alleged that the imported raw materials were not utilized for export goods manufacture, as required by the Notification. The Tribunal found merit in the department's argument, concluding that the goods were diverted instead of being used for export obligation discharge.

The Notification specified that exempt materials must only be used for export obligation discharge or replenishment, not for sale or transfer. The appellants failed to prove that the goods were used for replenishment, insisting they were used for export product manufacture. However, the Revenue successfully disproved this claim, showing a violation of the Notification condition. Consequently, the duty demand on the diverted goods was upheld, and the goods were liable for confiscation under Section 111(o) of the Customs Act.

The Commissioner's penalty imposition of Rs. 55 lakhs was deemed excessive by the Tribunal. Considering the circumstances, a penalty of Rs. 10 lakhs was deemed appropriate. Thus, the impugned order was modified to reflect this reduced penalty. The appeal was disposed of accordingly.